Telecom Gen i overhaul to cut 120 Aussie jobs

Telecom, the country's biggest phone company, has kicked off its structural overhaul by whittling down the services offered at its Gen-i Australia unit in a move that will see 120 jobs go.

The unit would focus on supporting large corporate customers with specific transtasman IT requirements and exit other activities, Telecom said. That would see the headcount fall to about 60 employees from 180.

"Gen-i Australia was originally set up about 13 years ago to serve the transtasman needs of existing corporate customers," Gen-i chief executive Tim Miles said. "Over the years, it has broadened its activities within the Australian ICT services market - but we have never had the scale to compete effectively in these other market segments."

Telecom is shifting its focus to providing services and away from building things to become a data-driven and mobile-focused telecommunications operator, and plans to shed hundreds of jobs and quit unprofitable businesses. More detail is set to be unveiled at the investor day in May.

The shares fell 5.7 per cent to $2.305, having gone ex-dividend yesterday.

No cost was put on the restructure, which will include a redundancy bill, although Telecom has indicated it expects to wear a material one-off cost in the second half of the financial year.

That charge has been excluded from Telecom's annual guidance for adjusted earnings before interest, tax, depreciation and amortisation of between $1.04 billion and $1.06 billion this year.

The company's Australian AAPT unit will pick up work that Gen-i Australia exits.

Miles said the transtasman market had "good growth potential" and accounted for about 40 per cent of New Zealand's international internet traffic, compared with 10 per cent at the turn of the millennium.

Telecom has joined rivals Vodafone New Zealand and Telstra to build a new transtasman cable at a cost of at least US$60 million, with a completion date flagged for 2014.

Gen-i's first-half earnings fell 1.6 per cent to $186 million on a 4.9 per cent decline in sales to $639 million.

BusinessDesk